Holden v Holden & Anor

Factual and Procedural Background

This judgment concerns a consequentials hearing following a trial on preliminary issues of liability arising from the dissolution of a farming partnership ("the Partnership") among three brothers. The prior judgment addressing those preliminary issues is reported as Holden v Holden and Holden [2023] EWHC 3292 (Ch). The parties are the Claimant and two Defendants, who are the three brothers involved in the Partnership. At the preliminary issues trial, the Claimant and First Defendant participated fully, while the Second Defendant remained neutral due to a prior Settlement Agreement with the First Defendant under which he sold his partnership interest. The Second Defendant incurred legal costs during the proceedings and participated in this consequentials hearing seeking payment of those costs.

The preliminary issues trial addressed two main liability questions: (i) the "governing terms issue" concerning whether the Partnership was a partnership at will or governed by a draft partnership deed ("1990 Draft Deed"), and (ii) the "reopening accounts issue" concerning whether the Partnership's revenue accounts should be amended or were binding. The Claimant succeeded on the governing terms issue, and the First Defendant succeeded on the reopening accounts issue. The consequentials hearing primarily dealt with costs arising from these determinations.

Legal Issues Presented

1. Whether costs should be dealt with immediately following the preliminary issues trial or deferred until the conclusion of the entire litigation.
2. Which party should be regarded as the successful party for the purposes of costs.
3. Whether the Second Defendant was a necessary party to the proceedings and, if so, who should bear his legal costs.
4. Whether the Settlement Agreement between the First and Second Defendants precludes the Second Defendant from recovering costs related to this litigation.
5. The appropriateness of the court making a "Bullock" order regarding costs among the parties.
6. The allocation of costs for the consequentials hearing itself.

Arguments of the Parties

Claimant's Arguments

• The Claimant argued he was the successful party on the principal governing terms issue, which was the most important issue at trial.
• The reopening accounts issue, on which the First Defendant succeeded, was of subsidiary importance and should only reduce the costs payable by the unsuccessful party proportionately.
• The Second Defendant was a necessary party to the litigation as a partner at the relevant times and should remain so for final accounting and winding up of the Partnership.
• The Second Defendant's entitlement to costs should be pursued against the First Defendant as the overall unsuccessful party.
• The Settlement Agreement should not prevent the Second Defendant from recovering costs related to this litigation.
• The court should make an order requiring the First Defendant to pay 50% of the Claimant’s costs and share equally in the Second Defendant's costs.

First Defendant's Arguments

• The First Defendant contended that costs should be deferred until the conclusion of the entire litigation due to uncertainty about the ultimate successful party and possible settlement offers.
• He argued that the reopening accounts issue was as important as the governing terms issue and that there was no overall winner, warranting no order or reserved costs.
• The Second Defendant was not a necessary party, having sold his partnership interest and being indemnified by the First Defendant; his involvement could have been as a witness only.
• The Settlement Agreement between the First and Second Defendants precluded the Second Defendant from recovering costs related to the Partnership disputes and future claims.
• The First Defendant challenged the appropriateness of the proposed Bullock order and sought to limit cost liability.
• He contended that the Second Defendant's costs should be borne by the Claimant, given the Second Defendant’s lack of interest post-Settlement Agreement.

Second Defendant's Arguments

• The Second Defendant sought payment of his legal costs incurred despite attempting to remain neutral and being joined unwillingly.
• He did not strongly prefer whether costs should be paid by the Claimant, the First Defendant, or shared between them.
• His counsel argued that the Settlement Agreement did not intend to waive future rights to costs related to this litigation.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by considering whether to deal with costs immediately or defer them. It acknowledged the discretion under CPR rule 44.2(1) but emphasized the modern approach favoring prompt costs decisions to encourage efficiency, professionalism, and equality of arms, especially given the disparity in wealth between the parties. The court analyzed whether offers made were Part 36 offers, ultimately determining they were not due to procedural deficiencies and terms requiring further agreement, and thus treated them as Calderbank offers admissible for costs consideration.

On the question of the successful party, the court identified the governing terms issue as the principal and most important issue, which the Claimant won. Although the First Defendant succeeded on the reopening accounts issue, it was subsidiary and not fully resolved at this stage. The court therefore held the Claimant was the successful party for costs purposes.

Regarding the Second Defendant's status, the court examined whether he was a necessary party. Applying equitable principles and authorities, the court found that all partners, including assignors, must be joined in partnership dissolution proceedings because of their ongoing rights and liabilities inter se. The Settlement Agreement and assignment did not remove this necessity. The court rejected the First Defendant’s argument that the Second Defendant was unnecessary, noting potential risks if he were excluded.

On the allocation of the Second Defendant’s costs, the court reasoned that since both the Claimant and First Defendant contributed to the litigation requiring the Second Defendant’s involvement, it was just that costs be shared equally. The court interpreted the Settlement Agreement as ambiguous on costs waiver and, applying principles from BCCI v Ali, concluded it did not preclude the Second Defendant from recovering costs related to this litigation.

The court considered the appropriateness of a Bullock order, which involves one defendant paying costs to the claimant and another defendant reimbursing the claimant. It found the joinder of the Second Defendant reasonable and both parties responsible for his costs, justifying such an order despite the First Defendant’s objections and the limited authority of Whitehead v Searle.

Finally, the court addressed costs of the consequentials hearing, finding no clear winner between the Claimant and First Defendant but clear success for the Second Defendant. It ordered the Claimant to pay the Second Defendant’s costs of the hearing, with the First Defendant to reimburse the Claimant for a significant proportion of those costs and a penalty for wasting court time by initially resisting disclosure of offers.

Holding and Implications

The court's final decision is as follows:

• The Claimant is to pay the Second Defendant's costs of the preliminary trial.
• The First Defendant is ordered to pay 50% of the Claimant's costs of the preliminary trial and reimburse the Claimant 50% of the costs payable to the Second Defendant.
• The Claimant is to pay the Second Defendant's costs of the consequentials hearing.
• The First Defendant must pay the Claimant 25% of the costs relating to the consequentials hearing and 62.5% of the costs the Claimant must pay to the Second Defendant for that hearing.
• All costs are to be assessed on the standard basis, with particular scrutiny on whether the Second Defendant's costs were necessarily incurred.

The court’s order reflects a balanced approach to costs allocation based on the relative success of the parties and their responsibility for the Second Defendant’s involvement. It confirms the principle that necessary parties to partnership dissolution must be joined and fairly compensated, even if they seek to remain neutral. The order also illustrates the court’s discretion to make complex costs orders, such as Bullock orders, to achieve justice in multi-party litigation.

No new precedent was established; rather, existing principles were applied to the specific facts and procedural posture of this case.